How to invest your money sustainably

Are you thinking of investing? Use your money to support companies that are forward-looking, innovative and sustainable.

byUBS Insights 21 Jan 2020
Source: Martina Meier

The majority of over 2,200 scientific studies over the past 40 years show that the inclusion of ESG criteria (environmental, social and governance criteria) will not cost you returns. On the contrary, more than half of the studies show positive effects. Sustainable investments reduce reputation, corruption and environmental risks, for example. Do you have any other questions? UBS expert Karsten Güttler has the answers.

What defines “sustainable investments”?

A sustainable investment achieves the same performance as a conventional investment. The difference is that sustainable investments take into account the long-term effects on society. This is described by the technical term ESG. The best way to understand is to compare an investment to medication: it comes with an information leaflet in the packaging, listing the side effects. The aim of a sustainable investment is to have as few side effects as possible whilst creating transparency at the same time. Traditional investments do not even pay any attention to the information leaflet.

What does sustainable investment really mean and why is it worthwhile?

The world population currently consumes the resources of about 1.7 earths. But we only have one earth. As a result, it is important for us to be committed to sustainability. Each individual bears responsibility – for the planet and for future generations. If we look at the performance of sustainable investments, we can see that they perform at least as well, and in many cases even better, than traditional investments. Financially and socially, there is therefore much to be said for sustainable investments.

Sustainable Investing at a glance

Would you like to find out more about sustainable investing? UBS has summarized the most important information for you.

Are we talking about a short-lived trend or a long-term movement?

When I look at my 17-year-old daughter, who is also participating in the “Fridays for Future” protests, I can safely say that this is something that will last. Companies and investors will find a different clientele in the future. This generation is proactively demanding that we become more ecologically aware and less egocentric. I believe that this trend will even grow.

What do investors have to pay attention to when buying sustainable products?

Whether an investment is sustainable or traditional, it must always perform well. The key factors are risk, returns, liquidity and costs. When opting for sustainable investments, the investor must also consider which values are important to them. For example, does it matter if a company pays minimum wages, or that female workers have the same salaries as their male colleagues? You choose the investment according to your personal preferences and values. On the other hand, not every single aspect that you regard as sustainable will be feasible all the time. Even if you focus on sustainability as an investor, you have to be able to make compromises – that’s how things work in the real world.

What investment instruments does UBS offer clients who want to invest sustainably?

Our core products include sustainable investment funds. We offer a selection of various equity and bond solutions that are optimized in terms of both the return profile and the sustainability profile. Other products include the Long Term Themes equity fund, which invests in companies concerned by sustainable megatrends such as the consequences of population growth, aging and urbanization.

Which sustainability products can be expected in the future?

The expansion of sustainable investments is one of the central themes of UBS’s corporate strategy. There will be new solutions to address sustainability issues across all asset classes. In defining these new products, we look at the UN's Sustainable Development Goals, the CO2 footprint and sustainability ratings. But we also want the pension solutions available to Swiss private clients to be more sustainable. To let you into a little secret, there will be appropriate options for this at the beginning of next year.

Who are sustainable investments suitable for?

Sustainability is suitable for everyone.

When should I start investing?

The general rule is: the sooner the better. But of course it depends on your individual situation in life. If a client wants to build a house in five years, then it is not advisable to invest in a high proportion of shares. That’s precisely why it’s worth obtaining advice from UBS. The advisor can work with the client to define which investment solution fits the client’s current situation.